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MSN hosts a debate between Peter Schiff and Diane Swonk
on Inflation:
Fact or Fiction?. Schiff makes a number of very Austrian-sounding points:
·
inflation
is an expanion of money and credit, not rising prices
·
inflation
affected mostly financial markets in the 90s - money created here went abroad
for goods, while foreigners sent the money back for stocks, then later bonds,
and then in the lat few years, real estate
·
this
cycle is now leaking into commodities
·
risking
stock, bond, and real estate prices are all forms of inflation
·
the
Fed is trying to confuse the public about the true nature of inflation
·
financial
markets have been fooled about inflation
·
inflation
creates mal-investments and distorts economic thinking
·
foreign
central banks have inflated in parallel with the Fed to prevent their
currencies from rising against the dollar
·
A
lot of China's import demand for natural resources is an artifact of the
export of US inflation
·
US productivity growth is
overstated by statistical manipulations
·
the
CPI is highly manipulated
Swonk makes a number of rather astounding counter-arguments:
·
money
supply growth is not relevant as a measure of inflation
·
the
Fed won't figh asset-based inflation, so investors shouldn't care about it
·
the
economy is "inflation-resistant" as long as profits are rising
·
investors
should be more interested in how the government defines inflation than in
abstract theories such as inflation being a money and credit growth
·
the
Fed are "the experts" on inflation
·
US productivity growth has
been strong
·
the US has the highest propensity to consume and invest of any country in the world
Regarding Swonk's last point,
how this could possibly be true is not clear, since the consumption and
investment combined cannot exceed income, so the consumption can only
increase at the expense of investment, and vice versa .
Robert Blumen
Robert Blumen is an independent
software developer based in San Francisco, California
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